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The Internal Controls in Your 401k Plan

Published by Kim Moore on Oct 9, 2019 6:00:00 AM

If you are a retirement plan administrator, then you know that good basic internal controls are the foundation for fiduciary and compliance requirements. It’s true that plan operations and internal controls can be very complicated causing them to be frequently ignored and a potential source of compliance breaches. A Plan Administrator must comply with both the regulatory requirements that apply to the Plan and the Plan document itself.  This helps to presser the plan’s qualified tax status.  Common mistakes that occur are due to:

  • The terms of the plan document were not followed.
  • Failure to revise plan document terms.check_and_balance_-_Copy
  •  Failure to follow regulatory requirements
  • There are penalties as a result of a plans failure to comply that include:
  • The disqualification of your plan.
  • The loss of employer and employees tax deductions.

Some of the essential principles of good internal controls are:

  • Segregation of duties
  • Reporting and reconciliation
  • Oversight and monitoring
  • Review and authorization
  • Policies and procedures.
  • Assigning qualified personnel to perform the practices of plans functions and duties.

Internal controls are essential because when properly designed and implemented will reduce the chance of fraud and errors. It provides a “check and balance” for accuracy in plan reporting and the security of the plans assets. This will also aide in the detection of mistakes and will prevent costly issues and any potential plan participant issues that may arise.

When it’s time for an audit for your plan it’s vital that you hire a trusted auditor. At Summit CPA we specialize in retirement plan audits. We have the ability to offer assistance entirely off-site with little or no distraction to your daily office routine. We also offer flat-fee pricing so there are no surprises on your bill when the job is complete. For assistance contact our office at (866) 497-9761 to schedule an appointment.

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